ACIT, Circle - 41, Kolkata, Kolkata V. Shri Niranjan Mondal, Kolkata

ITA 1778/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54631 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 15-09-2010
• Court: TRIBUNAL
• Department Lawyers: K R MONDAL
• Assessee Lawyers: R SALARPURIA
• Keywords: Unexplained investment; Corroborative evidences; Assessment record
• Section: 69; 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO . 1778/KOL/2010 %& '(/ ASSESSMENT YEAR : 2005-06 (*+ / APPELLANT ) A.C.I.T., CIRCLE-41, KOLKATA - % - - VERSUS - . (-.*+/ RESPONDENT ) SHRI NIRANJAN MONDAL, KOLKATA (PAN:AFCPM 7821 G) *+ / 0 '/ FOR THE APPELLANT: SHRI K.R.MONDAL -.*+ / 0 '/ FOR THE RESPONDENT: SHRI R.SALARPURIA 1%2 / !# /DATE OF HEARING : 17.10.2011. 3' / !# /DATE OF PRONOUNCEMENT : 04.11.2011. '4 / ORDER ( (( ( . .. . ! ! ! !. .. . ) )) ), , , , '# PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY REVENUE AGAINST THE ORDER DATED 08.06.2010 OF THE LD. CIT(A)-XXIV, KOLKATA. 2. THE BRIEF FACTS OF THE CASE ARE THAT WHILE DOIN G THE SCRUTINY ASSESSMENT AO HAS TREATED THE LONG TERM CAPITAL GAIN OF RS.42,70,920/ - AS SHORT TERM CAPITAL GAIN BY OBSERVING THAT ASSESSEE CLAIMED EARNING OF TAX FREE LONG TERM CAPITAL GAIN ON SALE OF TWO COMPANIES AS UNDER :- SHARES PURCHASE SAL E GAIN NOS. VALUE NOS. VALUE LIMTEX 7,000 93,310 7,000 14,27,930 13,34,620 MANGALAM 10,000 40,700 10,000 29,77,000 29,36,300 2.1. ON FURTHER ENQUIRY , ASSESSEE HAS FURNISHED THE FOL LOWING DOCUMENTS : 2 - ALL PAYMENTS ARE THROUGH CHEQUES. - CONTRACT NOTE WERE SUBMITTED WHICH IS LEGAL DOCUM ENT. - HE IS NEITHER AWARE NOT RESPONSIBLE FOR WHAT BROK ER HAS DONE OR HAS NOT DONE. - HE HAD AUTHORIZED THE BROKER TO KEEP THE SHARES O F LIMTEX INVESTMENT THAT IS THE REASON THE SHARES WERE REFLECTED IN DEMAT TRANSAC TION STATEMENTS AND DELIVERED TO HIS DEMAT ACCOUNT ONLY WHEN HE SAID SO. - DATE OF TRANSFER OF SHARES IN DEMAT ACCOUNT IS NO T THE DATE OF ACQUISITION OF SHARES. 2.2. HOWEVER, ASSESSING OFFICER HAS NOT BELIEVED TH E CONTENTION OF ASSESSEE BY OBSERVING THAT THE KOLKATA STOCK EXCHANGE HAS SPECI FICALLY DENIED THE FACT THAT M/S.BUBNA STOCK BROKING SERVICES HAS NOT MADE ANY TRANSACTIONS ON ONLINE TRADING SYSTEM OF THE EXCHANGE ON 15.10.2003, 17.10.2003 AN D 22.10.2007 AS CONTENDED BY ASSESSEE. HE FURTHER BASED ON THE VARIOUS CORROBORA TIVE EVIDENCES GATHERED AND BASED ON SEBI INSTRUCTIONS/CIRCULARS TREATED THE LONG TER M CAPITAL GAIN SHOWN BY ASSESSEE AS SHORT TERM CAPITAL GAIN BY ADOPTING THE DATE OF PURCHASE AS SHOWN IN THE DEMAT ACCOUNT OF ASSESSEE. HE FURTHER ADDED AN AMOUNT OF RS.93,310/- AS UNEXPLAINED INVESTMENT BY OBSERVING AS UNDER :- 19. UNEXPLAINED INVESTMENT. THE FACTS ON RECORD AS DESCRIBED ABOVE SHOW THAT AS SESSEE HAS ACTUALLY PURCHASED SHARES FROM THE BROKER ON THE DATE THE SH ARES WERE TRANSFERRED AND TRIED TO SHOW IT AS LONG TERM CAPITAL GAINS IN ORDER TO CLAI M EXEMPTION FROM TAX. THE REASON FOR SUCH TACTICS IS TO ROUTE THE BLACK MONEY IN FOR M OF TAX FREE INCOME. IF THE ASSESSEES LOGIC IS ACCEPTED, THEN ANY SHORT TERM CAPITAL GAIN CAN BE CONVERTED INTO LONG TERM CAPITAL GAIN BY PROCURING A BOGUS CONTRACT. NOTE FOR PURCHASE OF SHARES OF EARLIER DATE. THE PAYMENT MAY BE ANYTHING BUT NOT THE PAYMENT MAD E FOR THE PURCHASE OF THE SHARES OF LIMTEX INVESTMENT. AS STATED ABOVE, THE ASSESSEE PURCHASED THE SHARE F OR RS93,310!- ON 20/1 L/2004. SINCC THIS PURCHASE AMOUNT HAS NOT BEEN ACC OUNTED FOR IN THE BOOKS OF ACCOUNT, THE PROVISION OF SECTION 69A IS FULLY APPL ICABLE. THE INVESTMENT IS COMPUTED AS UNEXPLAINED INVESTMENT U/S 69 OF RS.93, 310/- 2.3. AND DISALLOWED AN AMOUNT OF RS.10,543/- ON ACC OUNT OF TRAVELING AND CONVEYANCE BY OBSERVING AS UNDER :- 20. TRAVELLING & CONVEYANCE : UNDER THE HEAD TRAVELING & CONVEYANCE RS.42,190/- WAS DEBITED. THIS AMOUNT, AS WAS REFLECTED IN THE LEDGER, WAS PAID TO MEMBERS OF STAFF FOR LOCAL CONVEYANCE. THE ENTIRE EXPENDITURE WAS INCURRED BY CASH, AND PAYMEN TS WERE MADE THROUGH SELF MADE VOUCHERS, SOME OF WHICH WERE WITHOUT PROPER AUTHENT ICATION. HENCE, HERE ALSO, 25% OF THE AMOUNT EXPANDED, BEING RS.10,543/-, IS DISAL LOWED ON ESTIMATE FOR WANT OF PROOF. 3 2.4. AND ADDED AN AMOUNT OF RS.20,000/- ON ACCOUNT OF LOW DRAWINGS BY OBSERVING AS UNDER :- 21. DRAWING : DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS SHOWN DRAWING OF RS.96,000/- ONLY FOR HIS EXPENSES. IT WAS ARGUED DURING HEARING THAT, BESIDE THE SAID AMOUNT OF DRAWING VARIOUS OTHER EXPENSES FOR PHONE, LOCKER RE NT, ELECTRIC CHARGES, ETC HAS BEEN SEPARATELY SHOWN IN THE INCOME & EXPENDITURE ACCOUN T OF THE ASSESSEE AND NO PORTION OF SUCH EXPENSES HAS BEEN CLAIMED AS DEDUCT ION IN THE COMPUTATION OF INCOME. HOWEVER, CONSIDERING THE FINANCIAL POSITION AND STA TUS OF THE ASSESSEE, THE DRAWINGS SHOWN APPEARS TO BE VERY LOW AND, THEREFORE, A SUM OF RS.20,000/- IS TREATED AS FURTHER EXPENSES FOR THE FAMILY MET FROM UNDISCLOSED SOURCE S AND ACCORDINGLY ADDED BACK TO THE RETURNED INCOME OF THE ASCESSEE. 2.5. ON APPEAL LD. CIT(A) AFTER TAKING INTO CONSID ERATION THE VARIOUS SUBMISSIONS MADE BY ASSESEE WHICH WERE INCORPORATED IN THE IMPU GNED ORDER AT PAGES 6 TO 9 TREATED THE LONG TERM CAPITAL GAIN AS SHOWN BY ASSE SSEE AS LONG TERM CAPITAL GAIN INSTEAD OF SHORT TERM CAPITAL GAIN TAKEN BY AO BY OBSERVING AS UNDER :- 2.3. AFTER CONSIDERING THE FACTS OF THE CASE AS DET AILED IN THE ASSESSMENT ORDER AND THE ARGUMENTS OF THE APPELLANT IT IS SEEN THAT THE AO H AS NOT DOUBTED THE TRANSACTION OF SALE AND PURCHASE OF THE TWO SHARES. THE CONTENTION OF THE AO IS THAT THE DATE OF PURCHASE OF THE TWO SHARES WAS NOT AS REFLECTED IN THE CONTRACT NOTE AND THAT THE CONTRACT NOTE WAS BOGUS. THE AO THEREFORE HELD THAT THE SHARES WERE PURCHASED ONLY ON THE DATE ON WHICH THEY WERE TRANSFERRED IN THE D EMAT ACCOUNT OF THE APPELLANT. FROM THE ASSESSMENT RECORD IT IS SEEN THAT ENQUIRY WAS MADE BY THE AO WITH THE BROKERS AND THE BROKERS HAVE CONFIRMED THE TRANSACT IONS AS NOTED IN THE CONTRACT NOTE. IT IS ALSO SEEN THAT THE SHARES WERE PURCHASED IN T HE AY. 04-05 AND THE INVESTMENT WAS SCRUTINIZED IN SCRUTINY PROCEEDINGS FOR A.Y. 04-05. THE PURCHASE AMOUNT WAS PAID BY THE APPELLANT BY CHEQUE TO THE BROKER AND COPIES OF BANK STATEMENT HAVE BEEN FILED SHOWING THE FLOW OF FUND FROM THE BANK ACCOUNT OF T HE APPELLANT WHICH HAS NOT BEEN DISPUTED. THE REFERENCE BY THE AO TO THE PENALIZING OF THE BROKER IS ALSO NOT RELEVANT TO THE ISSUE BECAUSE OF THE FACT THAT IT HAS NOT BE EN SHOWN THAT SUCH PENALTY WAS THE CONSEQUENCE OF UNFAIR PRACTICE ADOPTED BY THE BROKE R IN THE TRANSACTION WITH THE APPELLANT. THERE IS THEREFORE NOTHING ON RECORD TO ESTABLISH THAT THE CONTRACT NOTES WERE BOGUS AND THE TRANSACTIONS DID NOT TAKE PLACE. A REFERENCE MAY BE MADE TO THE CIRCULAR NO. 704 DATED 28.04.95. FROM THIS CIRCULAR IT IS SEEN THAT IN CASES RELATIN G TO SHARE TRANSACTIONS THE HOLDING PERIOD WILL BE RECKONED FROM THE DATE OF TH E BROKERS NOTE FOR PURCHASE ON BEHALF OF THE INVESTORS AND THE DATE OF CONTRACT AS DECLARED BY THE PARTIES WILL BE TREATED AS DATE OF TRANSFER PROVIDED IT IS FOLLOWED BY ACTUAL DELIVERY OF SHARES AND THE TRANSFER DEEDS. ON APPLYING THE ABOVE PRINCIPLE TO THE TRANSACTION IN THE APPELLANTS CASE CLEARLY THE DATE OF PURCHASE HAS TO BE TAKEN A S PER THE CONTRACT NOTE AS ALTHOUGH THE PURCHASED SHARES WERE NOT TRANSFERRED TO THE DE MAT ACCOUNT OF THE APPELLANT ON THE DATE OF THE CONTRACT NOTE BUT THE CONTRACT AS NOTED IN THE CONTRACT NOTE WAS FULFILLED BY WAY OF TRANSFER OF THE SHARES TO THE DEMAT. ACCOUNT OF THE APPELLANT AT A SUBSEQUENT DATE THUS ESTABLISHING THAT ACTUAL DELIVERY OF SHAR ES AND TRANSFER DEEDS WAS MADE HENCE, THE DATE OF BROKERS NOTE WOULD HAVE BE TREA TED AS THE DATE OF PURCHASE. 4 FROM THIS DISCUSSION IT IS THUS EVIDENT THAT THE DA TE OF PURCHASE WILL HAVE TO BE TAKEN AS NOTED IN THE BROKERS NOTE AND NOT AS THE DATE O N WHICH THE SHARES WERE TRANSFERRED IN THE DEMAT ACCOUNT OF THE APPELLANT ACCORDINGLY T HE ACTION OF THE AO IN TREATING THE PROFIT ON SALE OF THE ABOVE SHARES AS SHORT TERM CA PITAL GAINS CANNOT BE SUSTAINED. THE AO IS THEREFORE DIRECTED TO RE-COMPUTE THE LONG TER M CAPITAL GAINS ACCORDINGLY AND ALLOW THE EXEMPTION AS PER THE PROVISION OF SEC. 10 (38) OF THE ACT THESE GROUNDS OF THE APPELLANT ARE THEREFORE ALLOWED. 2.6. HE FURTHER DELETED THE OTHER ADDITIONS BY OBSE RVING AS UNDER :- 3.3. UNEXPLAINED INVESTMENT. KEEPING IN VIEW THE ABOVE AND THE DETAILED DISCUSSI ON IN PARA 2.3 ABOVE THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.93,310/-. THI S GROUND OF THE APPELLANT IS THEREFORE ALLOWED. THE APPELLANT GETS RELIEF OF RS.93,310/- 4.3. TRAVELLING & CONVEYANCE : FROM THE ABOVE IT IS SEEN THAT THE EXPENSES WERE DU LY VOUCHED AND THEY WERE INCURRED FOR THE PURPOSES OF THE BUSINESS WHICH IS NOT DISPU TED. THE AO HAS NOT POINTED OUT ANY SPECIFIC INSTANCES OF DISCREPANCIES NOTED BY HI M OR THE INABILITY OF THE APPELLANT TO PRODUCE THE REQUIRED PROOF. IN VIEW OF THE ABOVE, A ND THE FACT THAT THE MONTHLY AVERAGE COMES TO ONLY RS.3500/-, THE DISALLOWANCE I S DIRECTED TO BE DELETED. THIS GROUND OF THE APPELLANT IS THEREFORE ALLOWED. THE A PPELLANT GETS RELIEF OF RS.10,543/-. 5.2. DRAWING :DURING THE COURSE OF APPELLATE PROCEEDINGS THE AP PELLANT MADE WRITTEN SUBMISSIONS IN WHICH THE APPELLANT REITERATED WHAT WAS STATED BEFORE THE AO AND ALSO POINTED OUT THAT THERE WERE DRAWINGS BY THE OTHER F AMILY MEMBERS AND THE TOTAL DRAWINGS WERE RS.3,94,695/-. CONSIDERING THE ABOVE THE ADDITION OF RS.20,000/- IS DIRECTED TO BE DELETED. THIS GROUND OF THE APPELLAN T IS THEREFORE ALLOWED. THE APPELLANT GETS RELIEF OF RS.20,000/-. 2.7. AGGRIEVED BY THIS REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING THE LD. DR APPEARING ON BEHALF OF THE REVENUE HEAVILY RELIED ON THE ORDER OF ASSESSING OFFICER AND FURTHE R POINTED OUT THAT THE OTHER CORROBORATIVE EVIDENCES COLLECTED BY AO AT THE TIME OF ASSESSMENT SUGGEST THAT ASSESSEE HAS PURCHASED THE SAID SHARES ONLY ON THE DATES MENTIONED IN THE DEMAT ACCOUNT. THEREFORE, HE REQUESTED TO UPHELD THE ACTI ON OF AO IN TREATING THE CAPITAL GAINS AS SHORT TERM CAPITAL GAIN AS AGAINST LONG TE RM CAPITAL GAIN CONSIDERED BY LD. CIT(A). 3.1. AS REGARDING THE OTHER ADDITIONS, HE SUPPORTED THE ORDER OF AO. 4. ON THE OTHER HAND, THE LD. COUNSEL APPEAR ING ON BEHALF OF ASSESSEE HAD FILED THE OFFICIAL QUOTATIONS OF SHARES RELATING TO 15 TH OCTOBER, 2003, 17 TH OCTOBER, 2003 AND 17 TH MARCH, 2003 AND FURTHER THE HONBLE CALCUTTA HIGH C OURT IN THE CASE OF CIT VS KEDARNATH AGARWAL WHEREIN THE HONBLE HIGH COURT HA S UPHELD THE TRIBUNALS ACTION 5 IN THE SIMILAR FACTS AND CIRCUMSTANCES. THEREFORE H E REQUESTED TO TAKE THE DATES MENTIONED IN THE CONTRACT NOTES AS THE ACTUAL DATE OF PURCHASE AND TREAT THE CAPITAL GAINS AS LONG TERM CAPITAL GAINS AND THUS CONFIRM T HE ORDER OF LD. CIT(A) ON THIS ISSUE. 4.1. AS REGARDING OTHER DISALLOWANCES THE LD. COUNSEL FOR ASSESSEE HAS SUBMITTED THAT AO HAS MADE ALL THESE ADDITIONS BASED ON PRESU MPTIONS AND CONJECTURES AND WITHOUT BRINGING ANY MATERIAL ON RECORD. THEREFORE HE REQUESTED TO DELETE THE SAME. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND O N CAREFUL MATERIAL AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT THAT AS PER THE BOARDS CIRCULAR NO.704 DATED 28.04.1995 IN THE CASE OF SHARE TRANSACTIONS THE DATE MENTIONE D IN THE CONTRACT NOTES IS TO BE TAKEN AS THE EFFECTIVE DATE AND LD. CIT(A) HAS ALSO RELIE D ON BOARDS CIRCULAR NO.704 DT.28.04.1995 TREATING THE CAPITAL GAINS AS LONG TE RM CAPITAL GAIN. 5.1. AS REGARDING THE TRANSACTIONS NOT CERTIFIE D BY CALCUTTA STOCK EXCHANGE WE CONSIDER THAT THE OBSERVATIONS OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS KEDARNATH AGARWAL (SUPRA) ARE AS UNDER :- THE APPELLATE AUTHORITY FURTHER CAME TO THE CONCLU SION THAT THE ASSESSING AUTHORITY HAD DISALLOWED THE CAPITAL LOSS OF RS.15,29,049/-ON LY ON THE BASIS OF INFORMATION SUBMITTED BY THE STOCK EXCHANGE AND THE ASSESSING O FFICER HIMSELF HAD NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE TRANSACTIONS O F PURCHASE AND SALE OF THE SHARES IN WHICH THE ASSESSEE HAD SUFFERED THE LOSS WERE NO T GENUINE TRANSACTIONS. IT IS FURTHER RECORDED BY THE APPELLATE AUTHORITY THAT THE ASSESS EE HAD SUBMITTED THE COMPLETE DOCUMENTARY EVIDENCES TO PROVE HIS TRANSACTIONS OF PURCHASE AND SALE OF THOSE SHARES AND THE ASSESSING OFFICER COULD NOT PROVE THAT THE EVIDENCE SUBMITTED BY THE ASSESSEE WAS EITHER FALSE OR FICTITIOUS. IT WAS FURTHER POIN TED OUT THAT THE ASSESSEE HAD PURCHASED AND SOLD THE SHARES THROUGH THE REGISTERE D SHARE BROKERS OF THE CSE, THE DELIVERY OF SHARES WAS RECEIVED OR GIVEN THROUGH TH E DEMAT ACCOUNT AND THE PAYMENTS WERE MADE OR RECEIVED THROUGH THE ACCOUNT PAYEE CHE QUES AND THE CORRECTNESS OF THOSE DOCUMENTS WAS BEYOND ANY DOUBT. 5.2. KEEPING IN VIEW OF THE ABOVE FACTS, WE FI ND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) IN TREATING THE LONG TERM CAPITAL GAINS BY T AKING INTO CONSIDERATION THE PURCHASE OF SHARES AS MENTIONED IN THE CONTRACT NOT ES. THEREFORE WE CONFIRM THE SAME. 6 5.3. AS REGARDING THE OTHER DISALLOWANCES THE ISSUE OF ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IS CONSEQUENTIAL TO THE ISSU E RAISED IN GROUND NO.1. SINCE WE HAVE DECIDED GROUND NO.1 OF THE REVENUE AGAINST THE REVENUE WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.9 3,310/-. 5.4. IN THE RESULT GROUND NO.2 OF THE REVENUE S APPEAL IS DISMISSED. 5.5. AS REGARDING TRAVELING AND CONVEYANCE LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE EXPENSES WERE DULY VOUCHED AND THEY WERE INCURRED F OR THE PURPOSES OF BUSINESS WHICH IS NOT DISPUTED. ASSESSING OFFICER HAS NOT PO INTED OUT ANY SPECIFIC INSTANCES OF DISCREPANCIES NOTED BY HIM OR THE INABILITY OF ASSE SSEE TO PRODUCE THE REQUIRED PROOF. KEEPING IN VIEW OF THESE FACTS WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) AND WE CONFIRM THE SAME. 5.6. IN THE RESULT GROUND NO.3 OF THE REVE NUES APPEAL IS DISMISSED. 5.7. AS REGARDING THE ISSUE OF DRAWINGS ALSO IT IS OBSERVED THAT ASSESSING OFFICER HAS NOT TAKEN INTO CONSIDERATION OF THE OTHER FAMIL Y MEMBERS WHOSE TOTAL DRAWINGS WERE RS.3,94,695/-. CONSIDERING THE ABOVE FACT ONLY LD. CIT(A) HAS DELETED THE ADDITION ON ACCOUNT OF DRAWINGS. THEREFORE WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) AND WE CONFIRM THE SAME. 5.8. IN THE RESULT GROUND NO.4 OF THE REVENUE S APPEAL IS DISMISSED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 04.11.2011. SD/- SD/- , , , , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 04.11.2011. R.G.(.P.S.) 7 '4 / -5 6'5'7- COPY OF THE ORDER FORWARDED TO: 1. SHRI NIRANJAN MONDAL, 43-W, ULTADANGA ROAD, KOLKATA -4. 2 THE A.C.I.T., CIRCLE-41, KOLKATA. 3. THE CIT, 4. THE CIT(A)-XXIV, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA .5 -/ TRUE COPY, '4%1/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES